Due to the boom in the resource sector and increasing commodity prices, BHP is making money faster that it can spend it.
The miner has confirmed the news but has resisted calls from shareholders to outline how and when the surplus cash will be returned to them.
On Tuesday at the Merrill Lynch mining conference, held in Barcelona, the company’s chief executive Marius Kloppers faced questions about why it was not using its “wonderful cash flow and outlook to better reward shareholders.
Analysts have predicted that BHP could easily afford to return surplus cash amounting to $US5-10 billion annually, based on market consensus that the company’s earnings before interest, tax and depreciation would grow from $US25 billion last year to over $US40 billion in 2012and 2013, the Sydney Morning Herald reports.
Kloppers confirmed at the mining conference that at the “current moment” the company’s “run rate of cash generation is even beyond that development rate”, despite more than $US80 million of spending set out for expansions and growth projects in 2015.
"At the beginning of the year, we said we would return $US10bn of cash by year-end," he said.
"We’ve obviously made a very quick start of that.
"At the half year, we are going to review the situation again."
Kloppers comments follow BHP chairman Jac Nasser’s warning on Monday about short-term problems in developed economies.
"Although many economies are recovering, the world remains in a fragile state with persistent levels of unemployment and threats of inflation," Mr Nasser said in an address at the Melbourne Mining Club.
"For the medium term, we should be prepared for further downside as global monetary and fiscal tightening and economic restructuring takes hold."
BHP has returned $US10 billion to shareholders from on-market and off-market share buybacks, which are expected to be finished in June and the company is under pressure to outline initiatives at its June-year profit announcement in August.
Kloppers refused to confirm the figures, only saying that BHP had an “evaluation point coming up in the next couple of months.”
He said he expects the company’s global growth to remain “robust,” and reaffirmed the company’s faith in long-term Chinese demand, but said it must remain vigilant..
"Inflation has become a focal point, particularly in emerging economies such as China and India
"When coupled with broader risks evident in the developed world, such as sovereign risk indebtedness, volatility is likely to remain a key feature of markets in the shorter term, as we clearly saw last week."
Kloppers added that the long-term trend of Chinese demand meant more cash returns to shareholders and said BHP believed its big, low-cost Australian production hubs had more than 100 years of production remaining.
Image: BHP Billiton